Registration of beneficial owners
All legal entities entered in public registers, in particular trading companies registered in the commercial register, will have a new obligation from the beginning of next year. With effect from 1 January 2018, information regarding the beneficial owners of legal entities must be registered (“registration of beneficial owners”).
Implementation of this new registration is based on the strengthening of the rules to fight both terrorist financing and the legalization of the proceeds from crime (i.e. money laundering), governed at the European level by Directive (EU) No. 2015/849 of the European Parliament and the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. In the implementation of this Directive, the Czech Republic is to introduce, among other measures, the registration of beneficial owners. In addition, information on trust funds – that have not thus far been registered – will be recorded.
Who is considered to be a beneficial owner?
The definition of a beneficial owner is to be found in Act No. 253/2008 Coll., on certain measures against the legalization of proceeds from crime and terrorist financing, as amended.
A beneficial owner shall mean an individual who is in a factual or legal position to exercise, directly or indirectly, a decisive influence on a legal entity, a trust fund or other legal structure without legal personality. It is thus assumed that a beneficial owner of a business corporation (such as a limited liability company) is an individual who:
- either alone or jointly with persons acting in concert has more than 25 % of the voting rights in this business corporation or a shareholding in the registered capital exceeding 25 %;
- either alone or jointly with persons acting in concert controls a person stated above;
- shall receive at least 25 % of the profits of this business corporation, or
- is a member of the statutory body, representative of a legal entity in this body or in a position similar to that of a member of the statutory body, unless the business corporation has a beneficial owner or the beneficial owner can be determined according to the points above.
What information is to be registered?
For practical reasons, registration courts will register beneficial owners, the registration being governed by Act No. 304/2013 Coll., on public registers of legal entities and individuals, as amended.
The following information should be entered in the register of beneficial owners:
- name and present address (or official residential address, if different);
- date of birth and birth number (if available);
- reasons why the person possesses the status of a beneficial owner, i.e (1) information on the share in voting rights (if the status is based on direct participation in a legal entity); or (2) information concerning the share in funds to be distributed (if the status of a beneficial owner is based on the fact of being entitled to receive profit); or (3) information concerning another fact (if the beneficial owner’s status is established otherwise).
Who will have access to the data entered in the register?
The register of beneficial owners will not be made publicly accessible as is the case with public registers. Information on beneficial owners will not be provided in the form of extracts from registers.
Only selected entities shall be granted remote access to information on beneficial owners, including, without limitation:
- courts for purposes of legal proceedings,
- law enforcement authorities for purposes of criminal proceedings,
- tax administrators,
- intelligence services,
- Financial Analysis Office,
- Czech National Bank,
- Person obliged under Act No. 253/2008 Coll., on certain measures against the legalization of proceeds from crime and terrorist financing in connection with client identification and control,
- public aid providers, etc.
Remote access will be granted in such a manner as to allow the identification of specific individuals who access the register of beneficial owners.
When does the obligation to register come into force?
Under the present legislation, every legal entity is obliged to keep internal records by which it may identify and verify the identity of the beneficial owner as well as information pertaining to why the status of beneficial owner has been so assigned. This obligation applies as long as the person concerned remains the beneficial owner and for at least 10 years following the termination of the relationship.
From 1 January 2018, trust funds and legal entities registered in a public register will not only have the obligation to keep and update records of information regarding their beneficial owners but also to apply for the entry of this information in the register of beneficial owners.
The application should be filed on the respective form accompanied by documents to verify the information on the beneficial owner. However, the law does not give any specifics regarding these documents. The registration of information shall be subject to a court fee amounting to CZK 1,000; however, persons entered in a public register before 1 January 2018 will be exempt from the fee for a period of 1 year.
The application for registration must be filed without undue delay after the decisive circumstance has occurred, i.e. from the time the individual meets the requirements according to the beneficial owner definition. The application must be filed by the person authorized to apply for registration in a public register, that is, in principle, the person entered in a public register, such as a specific limited liability company.
The beneficial owners themselves have no obligation with regard to the legal regulation of registration, the relevant legal entity or trust fund being responsible for proper registration.
If we can be of any assistance to you regarding the registration of beneficial owners, please feel free to contact us at any time.